Category: General

Read about Adedeji’s take on technology, payments, financial inclusion, career, and credit.

Fraudsters count on banks and FinTechs not talking. It’s killing digital payments!

Fraud plagues Nigerian online transactions. Nigeria lacks centralized fraud prevention services, with the recent CBN watchlist being limited. A global fraud repository could aid but requires robust risk management and quality assurance. Collaboration is vital to combat fraud and ensure a safer digital environment.

Electronic fraud is a significant reason why many Africans especially Nigerians, including highly educated middle-class, don’t want to do transactions online or use digital products. While a lot is being done with efforts such as Two Factor Authentication, customer opt-ins, etc., frauds still go on because banks and payment providers don’t share information with each other.

Fraudsters are still having a field day because of one thing – evil thrives in darkness.

Recently one of my friends running a payment company called to find out what we could do to some people who did fraud on his platform. As a matter of practicality, I told him nothing.

Think about it, what if he went to the police? Unless the fraudsters were so brazenly sloppy, the Police probably can’t investigate to catch them. He will spend the next few months going back and forth like a poorly installed pendulum, some random arrests could be made, but in the end, just like others, nothing would happen.

So, he did what every payment company or bank has been doing since – improved his systems, licked his wounds clean and moved on with life. I’m dead sure he’s silently cursing them under his breath.

But my gut feelings told me these bad guys didn’t just start with him – they have been on this less than illusory career for long. And that is the crux of the matter.

In South Africa, the banks, payment providers, and just everyone came around to form the SAFPS (Southern African Fraud Prevention Service). If you did a bad thing and your name strolls into their list, trust me, your transactions will continue to fail, but you will know why.

International internet service providers also use large crowd-sourced databases of spammers (SPAMHAUS) where source IP addresses and domain names of spammers are logged. If you spam and your name goes there, your emails will never be delivered again (to those who use the database for filtering spams). Major companies in Nigeria, including almost all banks, use SPAMHAUS to protect their email infrastructure.

So why don’t we have the same thing in Nigeria? I am very sure if my friend had a service, he could check transactions against, the boys who scalped him may have been stopped from getting their loot. And let’s say he was their first port of call, if he reports them, they won’t be able to hurt anyone again.

The Central Bank of Nigeria (CBN) and Nigeria Electronic Fraud Forum (NEFF) did the right thing recently when the CBN watchlist was inaugurated. My banks have been sending me warning messages not to misbehave because if my name should enter that list, my own don do.

This list is limited to only banks and BVNs alone. However, we know that fraud surface area covers extend to emails, phones (those spammy BVN update alerts), IP addresses, etc. Another challenge is that many frauds happen on platforms beyond banks. For example, fraudsters routinely log into wallet systems to defraud hapless customers.

A centralized global repository of fraud information, accessible and non-partisan would go a long way to instill confidence, and just allow everyone to snore longer at night. The cost of transaction also goes down as cost attributable to fraud losses would not be overlaid on transaction fees anymore. However, without this repository and other means of squelching fraud, innovations from smart Fintechs may never reach that critical level as payers will always be frightened to go online.

If they could pull this off in South Africa, why not Nigeria? It would be to everyone’s benefit to collaborate and crowdsource information.

Nevertheless, crowdsourced fraud information comes with risks as well. What do I do if a payment provider maliciously put my name on that list and my transactions get flagged? What if someone takes them to court and asks for $1B damages for failed transactions?

A shared repository of fraud information doesn’t remove the requirements for proper risk management – which much FinTechs lack. I mean, risk management is as boring as hell, no place in the awesome sexiness of a startup. True? False! Adhering to regulations, PCI-DSS, ensuring that changes follow maker/checker processes, logging everything that moves, encryption, hashing before and after changes, etc. guarantees your neurons are used for product development, not recovery efforts.

You can’t underestimate the need for testing. Quality assurance is another major area of lack for Fintechs and this is probably responsible for 70% of the holes that the fraud lizards crawl through. Beyond normal happy path, regression, a double-blind ethical hacking can pinpoint gaps that need plugging.

Beyond all these, collaboration and information sharing will go a long way to keep the bad boys at bay; Christmas is around the corner, and everyone wants to hammer.

Where are these 37 Million Ghostpreneurs in Nigeria?

The ongoing revolution in payments, automated credits, and self-service onboarding that have fueled massive growth in digital banking over the last 3 years seems to have largely overlooked the Nigerian Micro, Small and Medium Enterprises (MSME) sector. Forget whatever anyone says, the small business owners have been left behind.  Who did they offend?
At a recent event, I touted the numbers from SMEDAN that Nigeria had, as of 2013, 37,067,416 MSMEs, someone almost stoned me with her stiletto (with wicked looking pointies that could be deemed a weapon of personal destruction) because the numbers just didn’t look real.
Or are they Ghostpreneurs?
The numbers didn’t add up for me as well. Where are these companies or micro-enterprises? Finding them is hard. I mean, every bank will tell you that 7% or less of its accounts belong to non-individuals. When you look at NIBSS June 2017 figures, corporate accounts are just 6.5M out of the 98M accounts strewn across 20+ Nigerian banks. And the 98M accounts belong to about 26.5M accounts which average about 3+ accounts per individual. And by the way, over 98% of account holders have accounts with more than one bank.
Something doesn’t add up.
Of course, it was easy to see. Many of the MSMEs run their businesses with their personal accounts, so they are probably not Ghostpreneurs. So Sisi Clara Cake and Thingz, Baba Bisi Furniture Works probably run off their personal accounts with Bank A and B. Would you have thought they love it that way? Maybe not.
Until recently, opening a personal account in Nigeria was one of those rites of passage where you must pull a tooth with rusty pliers, by yourself and without anesthetics. Calling it painful and sadistic would be an exercise in understatement. The good thing is that over the last 2 years, the self-service revolution has extended from digital services to account opening.
At first, banks streamlined their account opening packages, so you won’t have to write GMAT essays just to open your Savings Account and then naturally progressed to opening accounts online. Now, practically all forward-looking banks allow you to open accounts online or via USSD. Unfortunately, what you get is a basic Tier 1 account and to upgrade to a proper account you can live with, a trip to the bank branch is still required. Alat by Wema has done a good job though – you get to open a proper account 100% online, and even your debit card is ferried to your shanty free of charge. I hope others see the light!
However, opening a business account is still an exercise in morbid self-flagellation; no bank seems to get it right. They ask you for all types of documentation, like what tribal mark your dead great grandmother had (you never met her!). They require random documents from fledgling entrepreneurs, who can barely put together their business plans. Many of these documents require pilgrimages to dens of government agencies. Ultimately, unless that account is critical, most entrepreneurs use their personal accounts to run their side gigs.
Think about it, have you ever paid your friend that does small chops as side hustle via her company account?
The lack of ease to open a business account has been a lose-lose-lose for every single stakeholder.
Not having a business account, in the company name, means a small business will never be able to scale. I mean, do you think Shell or Mobil will give you a small supply contract with a personal account? Absolutely not. Furthermore, by the time the small business eke out some semblance of progress and a business account is opened, the company is locked out of valuable business loans because the new account would not have the financial history that has been lost to the founder’s account.
The efforts of different banks, especially Diamond and Fidelity Banks (Disclosure: I worked at Fidelity Bank), would continue to be hampered if the ease of business account opening is not addressed.
The government also loses because taxes are lost when revenues for companies are sunk into individual accounts. The government is also not able to have data to track the performance of MSME initiatives, and they are not able to drive grants to sectors in dire need of one (I dey try myself, I know!)
What the MSMEs need today is a bank, beyond the rhetoric and adverts, which can automate the account opening processes. If an individual does not need to worship at a bank branch to open accounts same should also be extended to MSMEs. A startup should be able to start the process, upload all documentation and have an account opened within minutes or hours at most. There are APIs, tools and other offline services available banks to authenticate almost all documentation required for business account opening. Each director or signatory in the account would also be part of the process and can be validated as well.
I honestly believe this would happen as soon as the market for individual digital payments reaches maturity. However, between now and then, the first banks to streamline this process may have a lockdown on MSME business accounts.

Getting my Clones to do the Work

If only cloning were a thing! Imagine the possibilities: one of me hustling at work, another spreading kindness, a third diving back into research, and two others launching a startup. And then there’s me, spending as I wish. Delusions…

If I could clone myself into 5 other annoying DejiOlowes, today would have been the day I would place the orders for new mes.

I woke up this morning not wanting to do anything, but hey, I have to work – else I won’t be able to get food on the table. But come to think of it, what if I had clones, they would have gone to work, slaving their miserable lives on my behalf while I get on the next flight for a late summer vacation.
Who could resist such?

So what if I could clone 5 of me, what would they be doing?

DejiOlowe1 would definitely be going to work. I mean, he needs to hustle for the money all of us would spend. He would be warned to behave himself, not get distracted, no drinks after work, and just be a chilled dude. In fact, he would clock in more hours a week than Elon Musk.

DejiOlowe2 would be the nice dude, working the phone; calling family and friends, visiting relatives, and doing charity work.

DejiOlowe3 should go back to my first love – researching medical devices and esoteric stuff. He may get back to the Ph.D. that I abandoned in 2011. There was also an abandoned photonics experiment that he must pick up and finish. Oh, I forgot about the meta-genetic algo optimization that he has to work on as well.

DejiOlowe4 and 5 would start a startup together. Not sure what they would do but hey, they better get going because they need to make a humongous amount of money for all of us to spend down the line.

If only I could get an extra DejiOlowe to be working the gym while the real me gets 6 packs, that would have been the icing on the cake. Drooling.

And the real me? Probably lounging around, I will control the bank accounts and I set spend-limits for the other hapless DejiOlowes. If 4 and 5 do a good job, then I should travel the world and visit all the exotic places I have always wanted to go. Bora Bora tops the list.

Damn, I need to get out of bed!

Your Friends Reflect Who You Are

The value of friendships can’t be over emphasized. Friendship shapes destinies. Choose wisely: those who inspire growth, drive ambition, and respect others, pushing you to become the best version of yourself.

On a bright Wednesday morning, the Chemistry teacher herded us like recalcitrant goats into the Chemistry lab, handed over the second term Chemistry exam sheets and asked each of us to call out our scores so that he could tabulate them. Everyone called the usual numbers; most got Bs and As. When it was my turn, my tongue felt like lead. I walked up to the teacher timidly to complain in the lowest cat meow voice I could muster (so I won’t have to shout out the impossible number).

I got 45%. Never felt more ashamed in my life.

Growing up, I wasn’t a particularly bright kid; but because I was inquisitive, everyone felt I was smart. I could wing my way around; but since I was also supremely lazy, it was mostly misses than hits.

After the unfortunate event in my SS2 (year 5 of high school), I went groveling to my two good friends for help. These guys were freaking smart, not kidding. Femi Gbonjubola was the king of Chemistry and Physics. Femi Olajide lorded over Further Math. They taught me Chemistry like I was a toddler.  A few months later, I did my General Certificate of Education (GCE) and got a few As and that was it. Life was made!

So, what was the point of that story and why should you care?

You can’t be better than your friends
Your friends are an indication of what you value, and you can never be better than them. Psychologists and sociologists have done tons of research on peer pressure and mob action. Everyone knows the company you keep can push you to greatness or infamy.

Friends affect your career and success more than prayers!
Growing up, I was lucky to be friends with people who took pride in challenging themselves to get better grades. That progressive rivalry made everyone to sit up, and it helped.

But then I remembered old schoolmates who didn’t care about grades and just wanted to wear the latest designer labels and shoes. Unfortunately for those old school mates, trying to be the social bee and getting bad grades seems to have a strong correlation.

But then, if your friends are the happening types and they network a lot professionally, hanging out with them increases your chance of bumping into a beneficial contact. Some of those serendipitous encounters have transformed lives significantly. Of course, if you have no friends and you hide at home after work every day you may not go far!

On the flip side, if your friends are the lau lau type, spending beyond means to impress everyone; raking up debt to buy business class tickets to watch Champions League when bills are crying to be paid, the end is usually not very good.

Ditch your friends; they are no good!
Do you have a friend who seems to have a negative attitude about life? He never sees the good in anything and always talking about how life is unfair; the weather is shitty, Donald Trump is the president of America (wetin concern agbéró with overload?), etc. Dump him; he’s no good!

Is your boyfriend insecure about your progress and always dissuading you from reaching your goals? Is he always preaching the how a woman should behave and must be seen not heard? (Fake preacher). Jilt him! There are too many good guys out there than for you to sacrifice your life to a sorry ass you met just four months ago.

If your friend doesn’t know how to save, is always envious of rich folks, loves to put up appearances, borrows money for parties…get LAWMA to take him out of your vicinity. He’s worse than dirt.

If any of your friends or side chicks wear fake designer labels or carries fake designer bags, dump them fast. The inferiority complex will rub on you the wrong way

If your friends don’t treat their drivers, house helps, office assistants, etc. with respect, run from them. It’s easy to know the values that people carry within them by the way they treat those less fortunate. You don’t know your friends until you have gone through a misfortune or two.

Choose your friends like you choose your underwear
I know some people are annoying, but if they have good values that you admire, choose them as friends or mentors. The positive attitude they impact on you would transform your life.

Pay attention to those who respect others and are considerate. Be close to very ambitious and driven people but want to use only legal means to achieve them.
If your friends love to read and be up to date about their environments, even if you fight, don’t lose them! They are worth more than their weights in gold.

Hang out with those who have self-confidence and let them boost yours as well. Many smart people have lost good opportunities because they were too self-conscious to seize them.

My friends are my heroes
I wouldn’t be where I’m today if those two scallywags, Femi and Femi, didn’t teach me Chemistry. It gave me the confidence to tackle the other subjects, and here I’m today, I finally got to be an electrical engineer (don’t ask me to fix your light though, we could both get electrocuted)

Femi Gbonjubola, unfortunately, left us Christmas day of 2002. Femi Olajide, on the other hand, has devoted the rest of his life cleaning dirty teeth and improving public health all over the world.

May you never lack good friends!

Dropbox banking: The backbone for Fintechs and a probable model for banking in the future

The argument about if Fintechs and Banks are frenemies would never end. And it’s justifiably so.

Retail banks have a model of providing checking, savings, investment account services. Of course, they layer that with credit cards, personal loans, mortgages, etc. Fintech showing up on the scene means one thing, banks would be losers. There isn’t any clearer way to say it.

Think about it this way, banks earn money from these services and would want to continue that way. Fintechs showing they could do it better means they also want to gain something as well. So, any of these could happen: banks would lose, and Fintechs could gain; Fintechs and banks would gain from increased service cost and customers would pay more; Fintechs would lose, and banks would be cool.

There is also the friction that comes with who owns the customer experience. Most banks loathe to see new players sandwich between them and the customers and would prefer to control every single data point. On the flip side, when customers start to use apps for Personal Financial Management and their bank accounts, they start seeing the banks as a repository of their funds or provider of loans.

Retail banks don’t even trust Fintechs as their services tend to aggregate and disintermediate. None of the banks want to be a bucket for storage.
But wait, why not?

The traditional model makes losers out of the retail banks for Fintechs to win, maybe the only way would be to have a new type of bank, modeled from grounds up to take away the arguments of retail banks.

So imagine a bank, fully licensed but whose interaction is via APIs that Fintech and others can use to connect to it. Fintechs are the actual customers because the banks help them to hold their customers’ funds and loans in compliance with the regulation.

Dropbox was happy to become the programmatic storage for many apps, and that cemented its position in the world of cloud storage. Of course, Google Drive, Box, Microsoft OneDrive, etc. support the same approach but nothing represents personal commodity storage more than Dropbox.

A bank, fashioned after Dropbox, could have the same model and would face no pressure to compete with Fintechs but be the backbone for them. Such a bank, with no direct customer interface, would be barebones to run with the most minimal of operational overhead.

Could this be a viable model?

If this model works, then it’s possible that the future of banking will be the gradual transformation to the utility company providing services to the Fintechs who will own the customers. Nevertheless, there may not be a total elimination of the traditional model though, or one where all banks become a full-scale utility.

The harsh reality for Fintechs is that banks still own the customers’ trust for now and that counts for a lot.

Being a utility player offers no room for differentiation, and it simply becomes a case of the best bank offering ease and variety of API integration (across the various requirements of the Fintechs – Risk and Regulatory Compliance – i.e.  KYC, AML, security of deposits, etc.).

What is likely to happen is more of a gradual acceptance of the Fintechs services as options for customers in areas where the banks may not have the capabilities. For example, Santander is selling SME lending via Kabbage or providing Personal Financial Management via Meniga, the ultimate Fintech bank that will provide an integrated suite of all the customers’ required financial services may just not be on the horizon yet.

But it will be interesting to see how this pans out for the future of banking.

#Note
Contributions from Ladi Asuni